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(RISK-1721) Variability in Accuracy Ranges: A Case Study in the Canadian Hydropower Industry

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Primary Author: John K. Hollmann, PE CCP CEP DRMP
Co-Author(s): Raminder S. Bali, P.Eng.; John M. Boots, P.Eng.; Chantale Germain, P.Eng.; Michel Guevremont, P.Eng. PSP; Kelman Kai-man Ng, P.Eng.

Audience Focus: Advanced
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA

Abstract: This paper presents a case study of the variability in accuracy ranges for cost estimates in the Canadian hydropower industry. The study sought to improve the participants’ understanding of risks and estimate accuracy for their hydropower projects of similar scope. The study team also sought to verify the theoretical accuracy curves identified in AACE International’s Recommended Practice (RP) 69R-12: “Cost Estimate Classification System – As Applied in Engineering, Procurement, and Construction for the Hydropower Industry”. The study team collected and analyzed actual and phased estimate cost data from 24 projects with actual costs from 50 million to 3.6 billion (2012$CAN) completed from 1974 to 2014. Greenfield, brownfield and revamp impoundment and hydropower generation facility projects from across Canada were included (power transmission projects were excluded.) The study found that the range bandwidth (uncertainty) in RP 69R-12 is understated. Further, because actual contingency estimates are biased too low, the actual range curves are biased very high relative to those in RP 69R-12. The accuracy ranges and the underestimation of contingency are similar for hydropower and process industry projects.